Japan’s monetary base fell to -6.2% year-on-year in August, down from -4.1% the previous month. This suggests a reduction in the money supply within the country’s economy. The EUR/USD pair experienced modest gains above 1.1700, as fears of a potential US government shutdown weakened the US Dollar. Meanwhile, GBP/USD held steady near 1.3500, thanks to cautious remarks from Bank of England officials.

Precious Metals and Cryptocurrencies

Gold prices paused after hitting highs around $3,895, while the US Dollar remained weak amid shutdown concerns. Litecoin continued to climb, exceeding $118 and gaining over 10% this week. Technical analysis suggests it may rise above $130 soon. Inflation in the Eurozone rose to 2.2% in September, mainly due to energy prices. The European Central Bank is expected to keep interest rates steady. Trading Forex on margin is risky because of leverage, which may not be suitable for everyone. Traders should think about their investment goals and be prepared for possible losses. Consulting an independent advisor is a wise choice. Staying updated on risks is important. The Bank of Japan’s monetary base is decreasing quickly, now at -6.2% year-on-year. This indicates the central bank is normalizing its policies faster than expected, showing the most aggressive quantitative tightening since it began reversing its large stimulus from the past decade.

Impact of US Government Shutdown

The significant focus is on the US government shutdown, which is weakening the US Dollar. This political instability, along with a pause in crucial data releases like jobless claims, creates uncertainty for traders. During the shutdown in late 2023, the dollar index (DXY) saw a significant drop as fiscal stalemate hit Washington. This dynamic is reflected in currency pairs, with EUR/USD climbing above 1.1700. Although the European Central Bank is likely to stay on hold, the dollar’s weakness influences the market substantially. This trend makes strategies that favor a stronger euro or British pound against the dollar, such as buying call options, appealing. This uncertainty is also boosting gold prices, now nearing $4,000 an ounce. As a traditional safe-haven asset, gold thrives when confidence in the US government and currency declines. In the last month, open interest in gold futures on the CME rose over 15%, indicating strong institutional demand. Given the Bank of Japan’s tighter policies and a weakening dollar, we expect continued downward pressure on the USD/JPY pair. The yen may strengthen as the dollar weakens due to political issues. Thus, strategies like using put options on USD/JPY or selling futures could be effective in the coming weeks. Create your live VT Markets account and start trading now.

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